The inaugural SaaStock event took place in Dublin today. For a first time event, it was extremely high quality. Great speakers from both sides of the Atlantic sharing deep, actionable insights on succeeding in SaaS.
I gave a talk on achieving meaningful SaaS exits. I looked at actual data on SaaS exits then moved on to general tips for generating meaningful exits no matter where your business is.
Here are my slides…
Many startups launch focusing on the small business (SMB market). Given how large this market is, it can be a compelling target. There are 30M small businesses in the US alone. In addition, SMBs don’t have big purchasing departments and corresponding long sales cycles. If you reach the owner and solve a need that she has, you’re in!
I love the SMB market. Many of my previous startups have addressed on it. Most notably FreshBooks, which has built a very large customer base here. However, I have seen over the years that most startups that launch with an SMB focus eventually go up market serving larger customers. They do this because while the SMB market is huge and sales cycles are short, each customer is small and not worth much. So, you need a lot of them in order to build a big business. Acquiring lots of small customers in a cost effective way is difficult.
Without further ado, here are the only two ways that I know off to truly scale SMB SaaS companies:
1.) Ridiculously low cost of customer acquisition: Continue reading The only 2 ways to scale SMB SaaS
I have often said that churn (the rate at which customers cancel their subscriptions or otherwise stop buying from you) is the most important metric for a recurring revenue business. Why?
- The longer a customer stays, the more they are worth.
- The more they are worth, the more you can pay to acquire them.
- The more you can pay to acquire your customers, the faster you can grow.
- The faster you grow, the more capital you can raise to further accelerate everything. It’s a virtuous cycle.
The question I often get then is how much churn is too much? Continue reading How much churn is too much?
SaaS is a pretty simple business: You pay to acquire a customer on day one. Over time as you invoice that customer you recover your acquisition cost. From then on, the longer you keep that customer the more profitable they are. As the years go on and you keep more and more customers that you have already paid for, your business as a whole becomes profitable. Simple, right?
Tomasz Tunguz from Redpoint recently asked whether SaaS startups are less profitable these days. According to his data (below), no matter whether you sell to small companies or enterprise, over time the profitability of SaaS companies converges around a similar median.
Continue reading Two ways to grow your SaaS business